US Rate Cut, Malaysia's Structural Reforms And Economic Outlook Fuelling Ringgit Recovery -- BNM

The US Federal Reserve's (Fed) recent decision to slash interest rates has a significant impact on Malaysia's ringgit, especially in light of shifting currency dynamics across the region.

The American central bank's move to slash 50 basis points on Wednesday, the first in four years, will loosen tight monetary policies and inject confidence in weakening currencies, say analysts.

Bank Negara Governor Datuk Seri Abdul Rasheed Ghaffour said besides the US rate cut, Malaysia's positive economic outlook and structural reforms are also propelling the ringgit's rise.

“The ringgit's recent recovery is driven by the shift in expectations of lower interest rates in major economies, particularly the United States, as well as Malaysia's strong economic performance.

“Malaysia's positive economic prospects and structural reforms, complemented by initiatives to encourage inflows, will continue to provide enduring support to the ringgit.

“The MPC's (monetary committee policy) upcoming OPR (overnight policy rate) decision will continue to be guided by developments that affect the risks to domestic growth and inflation going forward,” he told Bernama in an email reply.

The ringgit is hovering around 4.20 against the US dollar.

Meanwhile, CIMB, in its Daily Digest research report on Thursday noted that  “regional currencies strengthened against the greenback, with the ringgit (+0.4%) continuing to lead the pack, followed by the Singapore dollar (+0.1%) and the Thai bhat (+0.1%).”

RHB noted that “lower global interest rates are generally economic-positive for ASEAN economies.”

“Bucking the rate cut bandwagon may be observed by both Bank Negara Malaysia and the Monetary Authority of Singapore, where we expect the BNM's OPR to stay at 3.0% for 2024, while MAS is to keep policy parameters unchanged for the whole year,” it said in a research report on 19th September.